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10-K - FORM 10-K - AVIENT CORPl38676e10vk.htm
EX-32.2 - EX-32.2 - AVIENT CORPl38676exv32w2.htm
EX-23.1 - EX-23.1 - AVIENT CORPl38676exv23w1.htm
EX-31.1 - EX-31.1 - AVIENT CORPl38676exv31w1.htm
EX-23.3 - EX-23.3 - AVIENT CORPl38676exv23w3.htm
EX-21.1 - EX-21.1 - AVIENT CORPl38676exv21w1.htm
EX-23.2 - EX-23.2 - AVIENT CORPl38676exv23w2.htm
EX-32.1 - EX-32.1 - AVIENT CORPl38676exv32w1.htm
EX-31.2 - EX-31.2 - AVIENT CORPl38676exv31w2.htm
EX-99.1 - EX-99.1 - AVIENT CORPl38676exv99w1.htm
EX-10.51 - EX-10.51 - AVIENT CORPl38676exv10w51.htm
EX-10.12 - EX-10.12 - AVIENT CORPl38676exv10w12.htm
Exhibit 99.2
Audited Financial Statements
SunBelt Chlor Alkali Partnership
Years Ended December 31, 2009 and 2008
With Report of Independent Registered Public Accounting Firm

 


 

SunBelt Chlor Alkali Partnership
Audited Financial Statements
Years Ended December 31, 2009 and 2008
Contents
         
Report of Independent Registered Public Accounting Firm
    1  
 
       
Audited Financial Statements
       
 
       
Balance Sheets
    2  
Income Statements
    3  
Statements of Partners’ Capital (Deficit)
    4  
Statements of Cash Flows
    5  
Notes to Financial Statements
    6  

 


 

Report of Independent Registered Public Accounting Firm
The Partners
SunBelt Chlor Alkali Partnership
We have audited the accompanying balance sheets of SunBelt Chlor Alkali Partnership as of December 31, 2009 and 2008, and the related statements of income, partners’ capital (deficit) and cash flows for each of the three years in the period ended December 31, 2009. These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnership’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of SunBelt Chlor Alkali Partnership at December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles.
         
     
/s/ ERNST & YOUNG LLP      
     
     
 
Cleveland, Ohio
February 18, 2010

1


 

SunBelt Chlor Alkali Partnership
Balance Sheets
                 
    December 31
    2009   2008
     
Assets
               
Current assets:
               
Cash
  $ 1,772     $ 13,230  
Receivable from OxyVinyls, LP
    5,867,957       2,142,230  
Receivables from partners
    6,852,165       17,351,616  
Inventories
    2,195,227       1,804,600  
Prepaid expenses and other current assets
    1,214,626       1,130,608  
     
Total current assets
    16,131,747       22,442,284  
 
               
Property, plant and equipment, net
    93,476,246       106,956,187  
Deferred financing costs, net
    641,183       721,330  
     
Total assets
  $ 110,249,176     $ 130,119,801  
     
 
               
Liabilities and partners’ capital
               
Current liabilities:
               
Amounts payable to partners
  $ 9,226,131     $ 7,466,830  
Current portion of long-term debt
    12,187,500       12,187,500  
     
Total current liabilities
    21,413,631       19,654,330  
 
               
Long-term debt
    85,312,500       97,500,000  
 
               
Partners’ capital
    3,523,045       12,965,471  
     
Total liabilities and partners’ capital
  $ 110,249,176     $ 130,119,801  
     
See accompanying notes.

2


 

SunBelt Chlor Alkali Partnership
Income Statements
                         
    Year Ended December 31
    2009   2008   2007
     
 
                       
Revenues
  $ 167,442,320     $ 173,019,093     $ 180,555,764  
 
                       
Operating costs and expenses:
                       
Cost of sales
    71,292,948       70,475,462       62,255,321  
Depreciation and amortization
    16,266,895       15,163,235       14,866,744  
Loss on disposal of assets
    397,166       2,125,117       118,249  
Administrative and general expenses
    11,906,084       11,663,995       12,042,123  
     
 
    99,863,093       99,427,809       89,282,437  
     
Operating income
    67,579,227       73,591,284       91,273,327  
 
                       
Other income
          372,631        
Interest expense
    (7,930,406 )     (8,811,563 )     (9,692,719 )
Interest income
    44,335       374,620       802,271  
     
Income before taxes
    59,693,156       65,526,972       82,382,879  
State income tax expense
    (315,000 )     (435,000 )     (376,271 )
     
Net income
  $ 59,378,156     $ 65,091,972     $ 82,006,608  
     
See accompanying notes.

3


 

SunBelt Chlor Alkali Partnership
Statements of Partners’ Capital (Deficit)
                         
    Partners    
    Olin   1997    
    SunBelt Inc.   Venture, Inc.   Total
     
 
                       
Balance at December 31, 2006
  $ (2,612,969 )   $ (2,612,969 )   $ (5,225,938 )
Cash distributions to partners
    (35,048,793 )     (35,048,793 )     (70,097,585 )
Net income
    41,003,304       41,003,304       82,006,608  
     
Balance at December 31, 2007
    3,341,542       3,341,542       6,683,085  
Cash distributions to partners
    (29,404,793 )     (29,404,793 )     (58,809,586 )
Net income
    32,545,986       32,545,986       65,091,972  
     
Balance at December 31, 2008
    6,482,735       6,482,735       12,965,471  
Cash distributions to partners
    (34,410,291 )     (34,410,291 )     (68,820,582 )
Net income
    29,689,078       29,689,078       59,378,156  
     
Balance at December 31, 2009
  $ 1,761,522     $ 1,761,522     $ 3,523,045  
     
See accompanying notes.

4


 

SunBelt Chlor Alkali Partnership
Statements of Cash Flows
                         
    Year Ended December 31
    2009   2008   2007
     
Operating activities
                       
Net income
  $ 59,378,156     $ 65,091,972     $ 82,006,608  
Adjustments to reconcile net income to net cash provided by operating activities:
                       
Depreciation and amortization
    16,266,895       15,163,235       14,866,744  
Loss on disposal of assets
    397,166       2,125,117       118,249  
Changes in assets and liabilities:
                       
Receivables from OxyVinyls
    (3,725,727 )     3,884,544       1,705,864  
Receivables from partners
    10,499,451       1,455,519       (4,503,853 )
Inventories
    (390,627 )     9,047       (206,513 )
Amounts payable to partners
    1,759,301       (1,370,177 )     (1,096,006 )
Prepaid expenses and other assets
    (84,018 )     2,694       327,468  
     
Net cash provided by operating activities
    84,100,597       86,361,951       93,218,561  
 
                       
Investing activities
                       
Purchases of property, plant and equipment
    (3,105,973 )     (15,352,635 )     (10,933,476 )
Proceeds on sale of property, plant and equipment
    2,000              
     
Net cash used by investing activities
    (3,103,973 )     (15,352,635 )     (10,933,476 )
 
                       
Financing activities
                       
Cash distributions to partners
    (68,820,582 )     (58,809,586 )     (70,097,585 )
Principal payments on long-term debt
    (12,187,500 )     (12,187,500 )     (12,187,500 )
     
Net cash used by financing activities
    (81,008,082 )     (70,997,086 )     (82,285,085 )
     
 
                       
Net increase (decrease) in cash
    (11,458 )     12,230        
Cash at beginning of year
    13,230       1,000       1,000  
     
Cash and cash equivalents at end of year
  $ 1,772     $ 13,230     $ 1,000  
     
See accompanying notes.

5


 

SunBelt Chlor Alkali Partnership
Notes to Financial Statements
December 31, 2009 and 2008
1. Organization
SunBelt Chlor Alkali Partnership (the Partnership) was formed on August 23, 1996 under a Partnership Agreement between 1997 Chlor Alkali Venture, Inc. and Olin SunBelt Inc. (the Partners). 1997 Chlor Alkali Venture, Inc. is a wholly owned subsidiary of PolyOne Corporation (formerly The Geon Company), and Olin SunBelt Inc. is a wholly owned subsidiary of Olin Corporation. Each of the Partners has a 50% interest in the Partnership. The Partnership Agreement provides that the capital investment of the Partners will be maintained and the Partnership’s income or loss will be allocated to the Partners based on their ownership interest percentages.
The Partnership was formed for the purpose of construction and operation of a Chlor-Alkali facility. The facility, which is located in McIntosh, Alabama, produces chlorine, caustic soda and hydrogen.
2. Significant Accounting Policies
Cash and Cash Equivalent
The Partnership considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. There were no cash equivalents held by the Partnership as of December 31, 2009 and 2008.
Inventories
Inventories are valued at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method.

6


 

SunBelt Chlor Alkali Partnership
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Property, Plant and Equipment and Depreciation
Property, plant and equipment are carried at cost. Major renewals and betterments are capitalized. Maintenance and repair expenditures which do not improve or extend the life of the respective assets are expensed as incurred. Depreciation for all plant and equipment is computed using the straight-line method over their estimated useful lives. The ranges of estimated useful lives are as follows:
         
Land improvements
  20 years
Buildings
  20 years
Machinery and equipment
  5—20 years
Long-lived assets are assessed for impairment when operating profits for the related business or a significant change in the use of an asset indicate that their carrying value may not be recoverable.
Deferred Financing Costs
Costs incurred by the Partnership in obtaining its long-term debt are deferred and amortized over the term of the debt using the effective interest method.
Financial Instruments
The carrying values of cash, accounts receivable and accounts payable approximate fair values due to the short-term maturities of these instruments. The fair value of our long-term debt was estimated based on current market rates for debt of similar risk and maturities. At December 31, 2009 and 2008, the estimated fair value of debt was $97,300,000 and $84,500,000, which compares to debt recorded on the balance sheet of $97,500,000 and $109,687,500 at December 31, 2009 and 2008, respectively.
Revenue Recognition
The Partnership recognizes revenues upon passage of title which is based on shipping terms.

7


 

SunBelt Chlor Alkali Partnership
Notes to Financial Statements (continued)
2. Significant Accounting Policies (continued)
Shipping and Handling Costs
Shipping and handling costs are included in costs of sales.
Income Taxes
No provision is made for income taxes other than the Texas state gross margin tax as the Partnership’s results of operations are includable in the tax returns of the Partners. The Partnership paid taxes of $317,192 in 2009, $435,000 in 2008 and $0 in 2007.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the accompanying notes. Actual results could differ from those estimates.
Risks and Uncertainties
Since the Partnership’s major products are commodities, significant changes in the prices of chemical products could have a significant impact on the results of operations for any particular period. The Partnership had one major chlorine customer, OxyVinyls LP, during the periods presented, which accounted for 38%, 31% and 38% of total sales for the years ended December 31, 2009, 2008 and 2007, respectively.
Subsequent Events
Events subsequent to December 31, 2009 have been evaluated through February 18, 2010, the date of issuance of these financial statements. There were no subsequent events requiring recognition in these financial statements for the year ended December 31, 2009.

8


 

SunBelt Chlor Alkali Partnership
Notes to Financial Statements (continued)
3. Inventories
Inventories are comprised as follows:
                 
    December 31  
    2009     2008  
     
 
               
Finished goods
  $ 1,230,161     $ 803,826  
Production parts
    965,066       1,000,774  
     
 
  $ 2,195,227     $ 1,804,600  
     
4. Property, Plant and Equipment, net
Property, plant, and equipment, net are comprised as follows:
                 
    December 31  
    2009     2008  
     
 
               
Land and land improvements
  $ 4,862,826     $ 4,862,826  
Building
    4,084,254       4,084,254  
Machinery and equipment
    239,096,069       236,246,567  
Construction in process
    843,473       1,807,849  
     
 
    248,886,622       247,001,496  
Less allowance for depreciation
    155,410,376       140,045,309  
     
 
  $ 93,476,246     $ 106,956,187  
     
5. Transactions With Affiliates
The Partnership has various management service agreements, dated August 23, 1996, with the Olin Corporation. These agreements, which include compensation for managing the facility, an asset utilization fee, a fleet fee and a distribution fee, have terms from five to ten years with five year price adjustment renewals. Charges for these services were $8,412,847, $8,150,580 and $8,309,350 for 2009, 2008 and 2007, respectively, and are included in administrative and general expenses in the accompanying income statements.

9


 

SunBelt Chlor Alkali Partnership
Notes to Financial Statements (continued)
The Partnership’s cash policy prohibits distributions to the Partners until the cash balance is sufficient to cover both the debt principal payments and interest expense for the year. The Partnership made distributions to the Partners totaling $68,820,581, $58,809,586 and $70,097,585 in 2009, 2008 and 2007, respectively.
In accordance with the Partnership Operating Agreement, the majority of chlorine produced by the Partnership is sold to OxyVinyls LP which was 24% owned by PolyOne Corporation until July 6, 2007. The remaining chlorine and all of the caustic soda produced by the Partnership is marketed and distributed by the Olin Corporation.
6. Long-Term Debt
On December 23, 1997, the Partnership borrowed $195,000,000 in a private placement of debt. The debt is secured by the property, plant, equipment and inventory of the Partnership. The term of the loan is 20 years at an interest rate of 7.23%. The first principal payment of $12,187,500 was paid on December 22, 2002, with equal annual payments due through December 22, 2017. Interest is payable semi-annually in arrears on June 22 and December 22. Interest payments totaled $7,930,406, $8,811,563 and $9,692,719 in 2009, 2008 and 2007, respectively. The debt is guaranteed by the Partners.
7. Leases
The Partnership has operating leases for certain property, machinery and equipment. At December 31, 2009, future minimum lease payments under noncancelable operating leases are as follows:
         
2010
  $ 2,107,826  
2011
    2,107,826  
2012
    2,107,826  
2013
    2,107,826  
2014
    1,840,451  
Thereafter
    1,724,942  
 
     
Total minimum future lease payments
  $ 11,996,697  
 
     
Rent expense was $1,879,007, $1,743,882 and $2,047,601 for the years ended December 31, 2009, 2008 and 2007, respectively.

10


 

SunBelt Chlor Alkali Partnership
Notes to Financial Statements (continued)
8. Commitments and Contingencies
The Partnership is subject to legal proceedings and claims that arise in the ordinary course of its business. Management evaluates each claim and provides for any potential loss when the loss is probable and reasonably estimable. In the opinion of management, the ultimate liability with respect to these actions will not materially affect the financial condition, results of operations or cash flows of the Partnership.

11